WASHINGTON – Credit union representatives brought their fight against the move to re-regulate the financial services industry to Capitol Hill yesterday against what appears to be growing odds.
"Most of the current crisis was caused by the actions of relatively unregulated financial institutions, and by compensation practices at even regulated institutions that encouraged excessive risk-taking. Neither of these factors exists at credit unions, CUNA’s Chief Economist Bill Hampel told lawmakers reviewing proposals for new regulations during a hearing before the House’s Small Business Committee. "Credit unions did not in any way contribute to the current financial debacle and their current regulatory regime, coupled with their cooperative structure, militates against credit unions ever contributing to a financial crisis."
Hampel and a credit union CEO representing NAFCU, Dawn Donovan, of Price Chopper Employees FCU, urged lawmakers to reduce regulatory limits on member business loans–something credit unions have been seeking for a decade–to leave them out of the proposed Consumer Financial Protection Agency and to retain NCUA as an independent agency, among other things.
But the credit union efforts appear to run counter to bipartisan support in Congress for greater regulation for all financial institutions, including new restrictions on mortgage lending, securitizations, overdraft protection programs, credit card interchange fees and consumer disclosures.
Despite urgings by the CUNA and NAFCU representatives, members of both parties expressed their support for the new consumer agency this week. House leaders are even proposing that an NCUA representative sit on the agency’s oversight panel.
"In coming weeks, Congress and the Administration will examine options for strengthening our regulatory structure. This is long overdue," said Rep. Nydia Velasquez, chairman of the Small Business Committee, during yesterday’s hearing. "The gaps in the system have grown too large to be ignored. We cannot count on current regulations to prevent another crisis. "
CUNA’s Hampel told the Small Business Committee that credit unions are concerned the consumer protection agency will create duplicative rules and procedures for credit unions and he suggested that for regulated entities like credit unions, the examination, supervision and enforcement of consumer regulations should remain with their regulator (NCUA or the state supervisors), while all consumer exam reports are shared with the new agency.
Price Chopper FCU’s Donovan suggested a different approach put forward by NAFCU that existing regulators, like NCUA, be allowed to create their own office of consumer protection that will have jurisdiction over their regulated entities. "We believe such an approach would strengthen consumer protection while not adding unnecessary regulatory burdens on our nation’s financial institutions," said Donovan.
She noted that credit unions have already been put under significant strains with this year’s failures of the requirement to pay for the failures of the nation’s two biggest corporate credit unions, U.S. Central FCU and WesCorp FCU.
Both credit union representatives urged that Congress leave NCUA out of plans emerging that would combine the four banking agencies: the Federal Reserve, Comptroller of the Currency, Office of Thrift Supervision and FDIC. Hampel said non-profits like credit unions should be regulated differently than banks and he noted the antipathy toward credit unions exhibited by banking regulators in the past, with the former head of the FDIC publicly calling for taxation of credit unions, and the one-time director of the Office of Thrift Supervision openly encouraging credit unions to convert to mutual savings banks.
Credit union lobbyists were optimistic this week that current plans do not include the merger of NCUA, but, they noted that plans change in Congress.
The credit union representatives also reiterated their call for Congress to lift the maximum 12.25% of assets limit on member business loans enacted in 1998 as part of HR 1151, the CU Membership Access Act. Ironically, if that does pass this year, it will probably be part of an omnibus financial services bill that includes some of the restrictions credit unions are fighting, according to several observers.
Also testifying at yesterday’s hearing were representatives of the U.S. Chamber of Commerce, American Bankers Association, Property Casualty Insurers Association of America, National Association of Mortgage Brokers, National Venture Capital Association, American Institute of Certified Public Accountants and Securities Industry and Financial Markets Association.
